Following the satisfactory amendment of French legislation, the
European Commission has closed infringement procedures against France concerning
excessive penalties for breaches of administrative requirements under French law
to declare any incoming or outgoing transfer of money, stock or securities equal
to or exceeding €7622.45 (FRF 50 000). The Commission had considered the
excessive penalties to be incompatible with EC Treaty rules on the free movement
of capital.

The Commission has never called into question the principle that a prior
administrative declaration is compulsory under French law, nor the fact that
penalties are imposed in case such an obligation is breached. It has rather
challenged the excessive level of these penalties, which at the time of the
Commission’s investigation amounted to the confiscation of the undeclared
money, stocks or securities plus the imposition of a fine that could reach the
full amount involved. Following an extensive inquiry, in January 2002 the
Commission decided to refer France to the European Court of Justice on this
issue. However, as France had indicated its willingness to amend the
incriminated legislation, the referral to the Court was temporarily
suspended.

The French legislation at stake was finally amended by the adoption of Law Nr
2004-204 of 9 March 2004 (‘Loi portant adaptation de la justice aux
évolutions de la criminalité’, published in the ‘Journal
officiel de la République française’ of 10 March 2004). In its
section 6, article 33-V amends significantly article L152-4 of the Monetary and
Financial Code. The level of the penalty is now limited to a quarter of the
undeclared amounts, and the rules include stricter procedures and conditions for
seizure and confiscation of the transported means of payment.

In addition, the French authorities have committed to realign their current
national threshold for cash transfers of €7622.45 to the new, most likely
higher, threshold which is due to be set at EU level in forthcoming proposals
for secondary legislation on preventing money laundering and monitoring cash
payments.

Therefore, taking into account the new amended legislation and this
commitment, the Commission has decided to close the infringement procedure
against France. However, the Commission intends to monitor closely the concrete
implementation of the new amended legislation, in order to ensure that the free
movement of capital is not unduly restricted.